Vanguard Total Stock Market Index’s AUM Passed Pimco’s Long Ago

All the jabbering[1] over VanguardTotal Stock Market IndexFund (VTSMX[2]) passing Pimco’sTotal ReturnFund (PTTRX[3])in AUM (assets under management) in October is both wrong, and wrong-headed.

Wrong: It’s wrong, because Total Stock Market Index actually has six different share classes with total assets of $306.1 billion as of the end of September. See table below:

[4]In fact, Vanguard Total Stock Market’s AUM surpassed those of Pimco Total Return in June. See the chart below:

[5]

Wrong-headed: The comments out of Vanguard headquarters in Malvern, Pa. are that Vanguard Total Stock Market’s passing Pimco Total Return signals investors’ love affair with indexing. This has nothing to do with indexing at all. It has to do with stocks versus bonds. From the end of Dec. 2007 when Total Return re-took the lead over Total Stock Market, the bond fund’s largest share class gained 44.8% through the end of June 2013 while Total Stock Market’s largest share class gained 27.0%. Just for comparison, Vanguard Total Bond Market Index Fund (VBMFX[6]) gained 29.2%.

As you can see, the actively-managed Total Return made mincemeat of the indexed Total Bond Market Index.

What’s really going on is that investors, five years too late, have finally determined that they’d rather be investing in stocks than bonds.